The North Dakota State Corporate and State Income Tax Rates Initiative, also known as Initiated Statutory Measure 2, was on the November 4, 2008 ballot in North Dakota as an initiated state statute, where it was defeated.[1] This measure would have lowered the state corporate income tax rates for tax years beginning after December 31, 2008 by 15 percent. It also would have lowered adjusted state income tax rates for both resident and nonresident individuals, estates and trusts by 50 percent, except for one taxpayer bracket where the reduction would be 45 percent and for two other brackets where $10,400 and $58,000 of income would not be taxed.[2]

Text of measure

Ballot title

This initiated statutory measure would amend sections 57-38-30 and 57-38-30.3 of the North Dakota Century Code.

This initiated measure would amend sections 57-38-30 and 57-38-30.3 of the North Dakota Century Code for tax years beginning after December 31, 2008 by lowering the state corporate income tax rates by fifteen percent and the adjusted state income tax rates by fifty percent, except for one taxpayer bracket where the reduction would be forty-five percent and for two other brackets where some income would not be taxed.

Statutory changes

Support

The North Dakota chapter of Americans for Prosperity sponsored the initiative. The chapter said that it wanted to make sure that "No taxpayer is left behind."[5] AFP wanted the legislature to cut taxpayers a break given a possible surplus of over a billion dollars by 2009.[6]

Supporting arguments

Arguments made in support of the measure included:

"The average family household earning $50,000 in taxable income would save around $500, that is real money to a lot of families. We should look at the surplus as an opportunity to increase the disposable income of the average family in North Dakota. We hear about North Dakota being a low wage state all the time, now is the time to declare that the state will be part of the solution to that problem, rather than adding to it."[5]

"Measure Two represents permanent and immediate tax relief for North Dakotans who have contributed to the vast state surplus everyone now agrees will exceed one-billion-dollars."[5]

"Last session, we spent 78 days debating how to provide tax relief to North Dakotans. However, the compromise we eventually approved expires soon. This measure will guarantee that taxpayers get long-term relief, not rebates based on what's might be agreed to each time the legislature meets."[5]

"Income tax revenues have nearly doubled in eight years, helping to produce the more than $1 billion in surplus in North Dakota. We can afford to give some of people’s money back to the working men and women of North Dakota–without hurting essential services and needs in the state."[5]

The Tax Foundation found in a recent study that North Dakota's economy is capable of handling the tax cuts, and that higher rates of economic growth will follow. Tax Counsel Joseph Henchman said, "If North Dakota moves in the direction of lowering tax burdens without undermining government services, there is a strong likelihood that better economic performance will follow," explaining that lower tax rates encourage innovation and investment.

Other groups that opposed the measure were the North Dakota Farm Bureau, the North Dakota Rural Electric Cooperatives, and the
North Dakota Board of Higher Education.

Arguments against Measure 2

Arguments in opposition to the measure included:

It would hamper state and local governments’ and school boards’ ability to respond to emergencies or shifting priorities in the future.[9]

A cut might not be sustainable when the oil industry or economy takes a downturn.[10]

Taxpayer perspective

Statutory Measure 2 would have lowered the state corporate income tax by 15 percent and cut the state personal income tax in half beginning in 2009. North Dakota was projected to have a $1.3 billion budget surplus, and this measure could have saved taxpayers over $415 million over two years.[11]

Path to the ballot

The initiative was approved for circulation in July 2007 by the North Dakota Secretary of State and was given one year to collect the 12,844 required valid signatures. The text of the petition as it was circulated can be read here. On July 21st, 15,667 signatures were submitted for approval. On August 25, 2008, it was announced that the measure had qualified for the fall ballot. If the measure had passed, the changes to the tax code would have taken effect on January 1st, 2009.[12][13]